Western Civilization has been flooded with so many choices in every aspect of our lives. Whether it is cleaning supplies, college course curriculum, or even finding something as simple as a pair of jeans. We have typically associated choice with an increase of freedom and the ability to steer our life in the direction that we so choose.
However, paradoxically we have become a victim to the plethora of choices out there and it is affecting us psychologically. The extra choices do not liberate us, but instead cause us to agonize over decisions and regret any "bad" purchases that were made.
Barry Schwartz's "The Paradox of Choice" is an excellent book that looks into the choices we make, the psychology of making choices, why we suffer from the choices we make, and lastly, what we can do about choice to live better lives.
Maximizers vs. Satisficers
Barry Schwartz identifies two different types of purchases: Maximizers and Satisficers. The key difference is that maximizers will strive to make the "best" purchase possible, while the satisficers are content with a purchase that is "good enough", which is to say that it meets their basic requirements. Typically maximizers are less satisfied with their purchases and also have more regret. It is okay to be a maximizer when shopping for products that are really important for you. It is only dangerous when you attempt to maximize every aspect of your life.
The Psychology of Choice
Barry Schwartz has a PhD in psychology and gives many psychology examples on how people will make decisions to buy products and their perception of gains and losses. Below, I have outlined a few of the key areas which he mentions that affect our decision to choose. The main purpose of these different factors is that the subjective value can be much different than the objective value. Typically the studies compare things that are equal in objective value, $20 for example, but then see how the different factors change the subjective value.
Accounts
Suppose that you have not yet paid for a concert ticket ($20) but lost a $20 bill the day before the concert. Would you still pay to the concert? What if, instead, you bought a concert ticket for $20, lost it, and had to pay another $20 for the concert ticket?
Although these two scenarios are identical objectively, subjectively they are much different because we tend to filter money different accounts. In the first case, the $20 loss was filed into a "general" account. But for the second scenario, the lost cost was $20 and the "real" cost of the concert ticket would then be $40. In the study that Schwartz cites, over 90% of people would be willing to buy the concert ticket in the first case, yet only 50% would do it in the second case.
Anchors
The idea of an anchor is to create a high price item in the store, a "deluxe" or "luxury" model, and then offer a more standard one. For example, a $100 pair of jeans may seem like a lot, but when compared to $200 pair of jeans, it looks like a bargain. Although not many of the $200 jeans will be sold, they will "anchor" the $100 jean products which leads to higher sales.
Like I wrote in The Dangers of Shopping, it is important to make sure that the purchase is needed and affordable on an absolute scale, not comparing it to the cost of the "high end" or "retail price". Otherwise, we can always justify a purchase as long as it isn't the "most expensive" model out there.
I personally witnessed a shameless example of anchoring at the Guess Factory Outlet store in Vacaville, CA. I asked them if they carried any products from their regular Guess stores and they said "No, the products are made specifically for the Guess Factory Outlet." What really disturbed me was that EVERY price tag had a MSRP (Manufacturer's Suggested Retail Price) and the "discount" price printed on it. Despite the fact that it was made specifically for the outlet, they framed it by posting an artificially high number to make it seem like it was a "bargain".
Gains and Losses
I thought the psychology of loss and gain was the most interesting part of the book and it really sets up the framework for why we agonize over choices. Briefly summarized, we feel more pain for a $100 loss than we feel happiness for a $100 gain. When choosing between a set of choices, there is seldom an option that is superior in every criteria. By not picking the "losing" option, we are giving up a trade off and thus a loss.
The studies explored in the book show that the more choices there are, the more trade offs or "losses" must be taken when making a decision. Because the pain of loss is greater than the happiness in gains, when confronted with too many choices, the buyer/consumer will often not make any decisions. This is true even when it is clear that there is an advantage by picking ANY choice (for example, employers would not pick his/her portfolio of 401(k) funds when there were too many choices, even though they knew they got an employer match).
The Green Factor
Within recent years, environmentalism has become a hot issue in the media and in people's everyday lives. There is now the option to offset your carbon emissions related to electricity use, buy organic produce,
However, by adding these options, it has further multiplied the number of choices that consumers must deal with. What is more important?
- Greenhouse Gases or aerosols?
- Organic or local?
- Water pollution or air pollution?
- Lower energy uses in CF lightbulbs or no mercury in incandescent light bulbs?
Strategies for dealing with choice
In the last chapter of the book, Schwartz suggests multiple ways and details how we can cope with the the abundant choices and making decisions. I have listed his suggestions below.
- Choose When to Choose
- Be a Chooser, not a Picker
- Satisfice More and Maximize Less
- Think About the Opportunity Cost of Opportunity Cost
- Make Your Decisions Non-Reversible
- Practice and "Attitude of Gratitude"
- Regret Less
- Anticipate Adaptation
- Control Expectations
- Curtail Social Comparison
- Learn to Love Constraints
My Thoughts
I think that this is a great book that has cleared up a lot of things in my life. I am one that is more of a maximizer rather than a satisficer. If I find out that I "could have" saved more money by doing X action, I tend to regret my purchase and am mad that I didn't make the best purchase possible. I will look to follow the steps that Schwartz has recommended, and that I outlined above. I need to be able to not regret my purchases and be happy when I have made a "good enough" purchase.
Although Schwartz suggests that you should worry less about your choices, I believe that it is still important to scrutinize your purchases, especially if it is above your hourly wage (see The Dangers of Shopping). However, it becomes dangerous when the cost of extra scrutiny goes beyond the cost of your time and mental health. The main thing is to "Choose when to choose". This of course will depend on your values and what you think needs to be the "best" and what you can be satisfied with "good enough".
You should only sweat the small stuff if the sweat that you put out is at least equal to the amount of sweat you might get back. An adage that would be appropriate here is "Penny wise, pound foolish". If you look at scrimping pennies on your small purchases, you might be overlooking the larger picture. The time you spend with your penny-pinching could be directed to something that will increase your well being or even make more money.
I really think that reading this book has the potential to make you much happier in life. You will look at life differently and your choices can bring true excitement and happiness. I plan to start a mini-series of blogs related on psychological issues of choice and discuss how just being aware of the psychology of choice can change your outlook and spending on life.
Recommended Books:
The Paradox of Choice: Why More Is Less - Barry Schwartz
- Barry SchwartzGoogleBook: Paradox of Choice (Sample)
Recommended Movies:
Barry Schwartz talk at Google
- Peter Camejo
Taylor Larimore
- Burton Malkiel
, looks at the history of water and how we can attempt to to become sustainable once again.
- Joe Dominguez, Vicki Robin
- James Howard Kunstler
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. This scenario is one in which the nations will have to cooperate and set policies to use the resources to the benefit of the most people and avoid resource wars.
- Naomi Klein
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- Jared Diamond
- William McDonough
- Peter Singer
- Jeremy Rifkin
- Paul Hawken
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- Amy Goodman
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